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ABA urges CFTC to review cross-border guidance to preserve overseas bank branching model

The American Bankers Association urged the Commodity Futures Trading Commission on Monday to promptly revise its Cross-Border Guidance in order to protect the bank branching model of U.S. firms overseas.

“The CFTC takes an overbroad extra-territorial reach in the Cross-Border guidance,” the ABA said. “The CFTC has unilaterally proposed a framework that has a high likelihood of significantly hindering overseas branches of U.S. banks from participating in local swaps markets—because non-U.S. persons will avoid trading with them and U.S. persons generally whenever possible to avoid the effects of the CFTC’s regulation.”

The ABA said that non-U.S. concerns regarding “competitive realities” and the “capability to comply” could discourage these participants from engaging in trading relationships with U.S. firms.

“Ultimately, these market participants may be deterred from transacting with overseas branches of U.S. banks because compliance with U.S. requirements may be duplicative of and in conflict with local requirements,” the ABA said. “Our member institutions have indicated that foreign competitors abroad are already actively seeking to limit their activity with U.S. persons and U.S.-based firms, while seeking to attract our customers by warning them that U.S. regulations will raise costs of service, decrease quality of availability of service, as we state above, even result in the customer becoming subject to U.S. regulatory requirements.”

Additionally, the ABA proposed that the CFTC should treat all overseas U.S. firms as non-U.S. persons.

“Overseas bank branching has a long and safe tradition, allowing a U.S. bank to retain capital and core managerial and operational support in the United States, while serving customers overseas via a branch office,” the ABA said. “Such branches apply local resourcing scaled to support the amount of local lending, deposit-taking and banking activity in each jurisdiction…We urge the CFTC to act promptly to treat overseas branches of U.S. banks as non-U.S. persons to preserve the U.S. bank branching model and the economic activity such branches support.”

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